Playing the Rewards Checking Game

by Kevin on August 9, 2012

In my last article I shared my irritation with you of how I got burned by a rewards checking program I was using that cut their interest rate to a minimal amount without notifying their customers.

I also told you I was okay with it.

Why?

That’s how the rewards checking account game is played.

You have to expect your account to be closed or the interest rate reduced. The bank knows it is a game. They know a certain number of people will sign up and use the account just enough to get the rewards interest rate – likely costing the bank some money or just breaking even on that customer. They also know a majority of people won’t max out the account or won’t meet the qualifications each month which leads to more deposits to lend out for profit while paying out minimal interest. Someone deep within their credit card analysis department the math has been done. X number of customers will mindlessly use account and Y will probably cost a little bit of money. As long as profit from X outweighs cost of Y, you move forward.

Is There Loyalty in Banking?

So level the playing field. Know it is a game when you get started. Don’t expect to open the account and keep it for the next decade. That’s not in line with reality.

The problem people run into with banks or credit unions is they get emotionally attached. They set up their checking account and maybe a savings account. They run by and talk to the nice teller when they deposit funds. They give your dog a treat when you go through the drive-thru lane. They seem to like you and your family.

When you’re blinded by loyalty to a bank you see it as something permanent in your life, something to check off their list of things to worry about. A relationship you have to keep.

In doing so these individuals rob themselves of improving their financial situation. The bank is playing you – nicely, most of the time – but they’re still playing from profit. You should, too.

Your relationship with your financial institutions – your bank, your investment account, your mortgage – should not be an emotional or personal one.

It’s business.

When you opened an account or applied for a loan, the bank did some math on your background to determine if you were qualified to work with them. They judged your capabilities. Why not do the same back to them?

Just because it is a business relationship doesn’t mean it can’t be a good relationship. Not at all. But business relationships don’t last forever. Both sides need to come in knowing this is a good deal for both sides right now, and if things change we’ll sever ties and move on.

But moving bank accounts is hard”, you might whine.

Fine, stay with your garbage account that pays you 0.05% on your deposits. (By the way, that rate pays $5 in interest on a $10,000 deposit for an entire year. Sounds paltry next to the $80 you could earn with an online savings account or $200 with a rewards checking account paying 2% interest on your deposit. Frankly I think the cost of moving accounts is worth that kind of money for a little bit of hassle.)

Truly, moving accounts isn’t that hard. Cancel direct deposit, cancel automatic payments from the account, go to a new bank, write a check, and setup a new account. Reactivate your direct deposit and wait for your debit cards to come in the mail. Once everything is setup, move your money over to the new account and
move on with your life.

What about you? How do you view your banking relationships?

{ 1 comment }

Golfing Girl August 9, 2012 at 7:44 pm

There is a lot to be said for customer service. If I am happy with my bank when I have a problem or need help, then I am willing to give up $20/year in interest and the headache of moving my money. Plus they are almost alway teaser rates, then you have to run around and move your money again. I’d rather get a small sum and great customer service. So yes, there is still loyalty in banking for us “old people” (I’m 36). 😉

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